what is CPAP profit margin

[harry33]

what is CPAP profit margin?

recently in australia I bought a new old stock resmed S7 lightweight for about half the price it was being retailed at when it was a current model
The dealer said they had decided to get rid of their few remaining S7 lightweights at about the price they had paid originally

this suggests a profit markup of about 100%

any comments?

[gasp]

what is CPAP profit margin?

recently in australia I bought a new old stock resmed S7 lightweight for about half the price it was being retailed at when it was a current model
The dealer said they had decided to get rid of their few remaining S7 lightweights at about the price they had paid originally

this suggests a profit markup of about 100%

any comments?

I believe you are referring to what the profit margin is to the DME? I think it has a wide degree of variables. If they bill insurance which is probably the case for most transactions, then they have to accept what insurance allows. Of course the allowable is based on a highly inflated price. There is the probable storefront which comes with huge operating expenses, employees, etc. etc.

I don't think whatever the profit margin is will be enough to make the small DME a highly profitable venture. However, for the huge DMEs, sheer volume has its rewards.

[billbolton]

any comments?

Your trust in what a retail salesperson says is touching, but probably quite misplaced.

Cheers,

Bill

[tomjax]

Harry asked:
this suggests a profit markup of about 100%


I am a tad confused.
What is a profit mark up?

A markup is that percent of cost that is added to the cost.
Profit margin is that percentage of selling price that is profit.

cost 1.00- sell for 2.00
Markup is 100 pct.
Profit margin is 50 pct

This is often confused by many people.

[archangle]

Don't assume that if the DME pays the manufacturer $500 and charges the patient $1000, the profit is $500. He has expenses, may pay in advance for the equipment, may get paid via a "rent to purchase" system, may have to eat some cost for rental return machines, etc.

However, the markup numbers on a lot of the DME's do seem to be rather extreme.

[tomjax]

The markup of many items submitted to insurance companies confuse a lot of folks.

Anyone who has ever looked at an EOB from your provider can be confused.

Any provider may submit ANY price they like for services.
They are, however, in most cases reimbursed a contracted amt.

Some providers will inflate the billing amt to try to get a larger pct co pay.

Most providers simply accept this amt and write off the balance.

Some, but not all.

I am presently being harassed by a collection agency for an ambulance bill for my wife being taken to hospital following a mild stroke.

I am taking the position that the insurance paid them a contract4ed amt and I owe them nothing.
Someone at the city saw this remaining balance as a source of income and turned the balances to a very agressive collectin agency to raise additional funds for the city.

I am stubborn and have not paid it.
these collection people are very funny at times.
I remain stubborn.
But what do I know?

And who does the 911 office call when THEY have an emergency?

[LinkC]

And who does the 911 office call when THEY have an emergency?

Whoyagonnacall? Ghostbusters!

Seal Team Six?

Their mother?

(I, too, was going to point out the difference between "markup" and "margin". I worked in retail for a while during college and was amazed/amused that doubling the price was routinely called "50%". )

[GTOJim]

Last June I got a new S9 auto, insurance reimbursement code E0601. My insurance authorized the reimbursement amount of $1235, I have a 50% co-pay. For a basic machine my insurance allows $760, which is a $475 price difference. Checking on-line pricing the basic machine sells for approximately $800, my machine (S9 auto) selling for about $850. Last time I checked the difference of on-line prices between the two machines was $48. To recap $48 difference on-line pricing, $475 price difference in what my insurance allows between a basic or auto CPAP.

Another example, DME billed my insurance $1,100 for a face mask, insurance allowed $125 of the billed amount. I'm sure the DME would expect me to pay the entire $1,100 billed amount if for some reason it wasn't covered by my insurance. I'm suggesting the markup amount can be all over the map so to speak.

[jedimark]

It's about 10,000%..

A cpap machine consists of a fan, PWM controlled motor, airflow/pressure sensors and a DSP/microprocessor control circuit.. Plus some usually buggy firmware. Fancy ones have a heater.

Everything else is plastic moulding, fluff circuitry (displays/keypads) and licensing costs. More advanced technology goes into your mobile phone.

I sound cynical don't I?

Medical equipment is always a rip-off.

[Bright Choice]

Medical equipment is always a rip-off.

When I think about what xpap has done to improve my quality of life and relationships with others, I don't consider it a "rip-off" at all. I am so thankful that I live at a time when technology can help me. I can't imagine what kind of a life people had "pre-xpap".

[chunkyfrog]

My hearing aid cost $2200--an amazing instrument, I wear it every day, all day, except when I am sleeping.
It makes a huge difference in my quality of life.
My S9 Autoset cost $853 from our hosts--I think it has saved my life.
A bargain at twice the price (but don't tell anyone)
I will probably never get another blower from a local supplier--their 'mark-up' is way out of line for the service they--wait, WHAT service?

[JDS74]

Markup, margins, costs - all interesting topics.

Taking a look at my Auto BiPap, it seems to me that the parts cost might be as much a $25 USD for the unit and maybe another $5 for the labor to assemble the device.

Retail price where I purchased one, including humidifier, hoses, etc, was about $1,300 USD.

So let's look at how one gets from one to the other.

I got mine from an online DME so the over head cost would be much less than at a bricks-and-mortar DME. Let's say my DME added 25% to their cost making the price to them roughly $1,000 USD.

The manufacturer typically charges about 5 times the actual parts cost to cover labor, parts, overhead so the manufacturer is looking at about $200 as their unit manufacturing cost.

Still leaves about $800 to explain.

In the US, we have a regulatory agency that requires all sorts of testing and evaluation, etc. to 'assure' the product is safe and effective. That's the FDA. That's probably another $200 - $300 additional cost we don't see.

Then, since it is a medical device and the cost to the manufacturer of some failure that injures us has to be covered by insurance. How about another $200 or so for that.

Next comes the cost of R&D to develop the next generation of devices. Another $50 or so for that.

And finally, profit to the Corp so they can stay in business. That's the rest ( taxes come out of this piece)

So $200 manufacturing, regulations 250, insurance 200, amortized research 50, and profit before taxes $300 to get to the total of $1,000.

None of those numbers seems to me to be way out of line.

How about worth. This device for many of us means that we won't get really sick or won't get really dead. Probably worth quite a bit to avoid those outcomes.

I'd guess that for most of us, that part has a value of at least 5 figures ( between $10,000 and $99,000).
At least,that's the way I see it.

[So Well]

Harry asked:
this suggests a profit markup of about 100%


I am a tad confused.
What is a profit mark up?

A markup is that percent of cost that is added to the cost.
Profit margin is that percentage of selling price that is profit.

cost 1.00- sell for 2.00
Markup is 100 pct.
Profit margin is 50 pct

This is often confused by many people.

This is confusing and it is not logical, but the vernacular of retail business is different from logic.

A product purchased for $1 and sold for $2 is said to have a markup of $1 which is perfectly logically.

However, when the retailer talks about markup percent, he will say, in this example, that the percent markup is 50%. He uses the selling price as the denominator. It is even presented this way in college-level retail marketing courses.

Generally in other industries, they don't talk about markup. They talk about margin dollars and margin percent and it follows logic.

There was a young man who wanted to start his own retail business. His mother suggested he get advice from his 89-year old great grandfather who had been a very successful retail merchant and well-respected community member.

So the youth had a talk with his elder. At the end of the discussion the youth asked him, "Do you have any one very important secret to your success that you will share with me?"

The elder said, "Yes, I do. My big secret was simple, I bought things and marked them up 10% and sold them."

The shocked youth said, "How could you have been successful with a markup of 10%?!"

The elder said, "Well it was successful for me for nearly 60 years!"

The youth said, "But I don't see how you could cover all your expenses and have a profit with a markup of 10%!"

The elder said, "You are making it too complicated. Just mark everything up 10%. For instance, if I paid $1 for a product, I sold it for $10 - a 10% markup."

[jedimark]

I wasn't suggesting CPAP was useless because it's simple.. I'm an engineer/developer and I look at all hardware products that way.

Saving someone's life should not cost so much.. The greed behind it all is disgusting to me.

Sure it takes resources to develop a product/drug/etc... but nowhere remotely near as much as they make out it takes.

[So Well]

The greed behind it all is disgusting to me.

Isn't the desire to obtain a product without paying the producers for their total effort greed?